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Invitations to Treat in a Contract Essay

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Updated: May 16th, 2022

Statement of the legal issue

Sally is used motorbike seller. She intends to sell a Cadell Evans ‘GF’ refurbished bike, and thus invites offers through online advertisement. Two buyers Peter and Burt show interest and are willing to buy the bike at a reduced price. Sally rejects Burt’s offer of $5000, leading to Burt’s withdrawals. However, Sally needs to sell the bike urgently and is forced to accept Peter’s offer of $4000. She communicates to peter in a timely manner, through email. Peter initially rejects the offer which infuriates Sally.

The rule of law

The principal issue is whether the element of agreement in this case permits a legally binding contract. The Australian law provides specific elements through which a contract is formed. These include agreement, consideration and “intent to create legal relations” (Thorpe, Thorpe and Bailey 1999, 42). In this case, it is evident that intent and consideration do exist. However, the legal enforceability of the agreement needs to be established. In forming an agreement, an offer has to be made. A valid offer includes specific terms for the offer, and is different from an invitation to treat. An invitation to treat is a call to others to submit offers. Advertisements are treated as invitations to treat. According to Thorpe, Thorpe and Bailey (1999, 44), acceptance to an offer is deemed to exist only if it corresponds with the offer value. In this case, a counter offer makes the previous offer null and void. If the offeror and the offeree fail to establish a “meeting of minds” with regards to the new offer, then any of the party is free to withdraw, without incurring any legal consequences.

Helewitz (2010, 23) asserts that acceptance of an offer ought to be effectively communicated to the offeror. Improvements in communication technology have altered business communication, and as such communication through emails, faxes and other forms of modern communication is deemed appropriate (O’Shea and Skeahan n.d., 2). In the case of Reese Bros Plastics Ltd v Hamon-Sobelco Australia Pty Ltd (1988) 5 BPR 97325; 15-305, Reese Bros Plastics Ltd contested the use fax as a means of accepting an offer made. In its ruling, the court acknowledged that any mode of communication similar to mail may be used to communicate acceptance. However, this rule does not apply to instantaneous communication. There are controversies with regards to whether email constitutes instantaneous communication. As such, O’Shea and Skeahan (n.d., 13) argue that it is quite difficult to determine whether email is instantaneous or non instantaneous mode of communication. In the Australian case of Olivaylle Pty Ltd v Flottweg GMBH & Co KGAA (No 4) [2009] FCA 522, Olivaylle Pty Ltd used email to communicate acceptance of an offer made by Flottweg. In determining the case, the judge argued that despite the fact that email is instantaneous, it was an acceptable means of communicating acceptance of an offer, since the acceptance was sent and received within the same geographical location (between Victoria and New South Wales). Additionally, according to Monahan (2001, 34) an offer can have time limit. Upon the lapse of the specified time, the offer is automatically terminated. As such, acceptance ought to be communicated to the offeror before time lapses.

Application of the rule of law

Unlike a social arrangement, an agreement is assumed to be legally enforceable in a commercial enterprise. The question is, bearing the facts of the case, whether Sally ought to enforce agreement with either Peter or Burt. The transaction between Sally and the two buyers seems to have been made commercially, and as such, the primary assumption is that the agreement is legally enforceable. There seems to be lack of concurrence with regards to the price of the bike, as a result of which the prospective buyers accept to buy the bike but at a lower price. Since an acceptance is only valid if it corresponds with the initial terms, it can therefore be concluded that there is no agreement enforceable as far as the initial price ($6000) is concerned.

It is possible to make several counter offers before and agreement is arrived at. However, if there is no “meeting of minds”, either party can withdraw from the transaction without incurring legal consequences for withdrawing. Burt’s counter offer of $5,000 is rejected by Sally, who is however, willing to sell the bike at a minimum price of $5,500. Burt rejects the offer and withdrawals before any agreement is reached, this incurs no legal consequences. Sally needs to send the bike urgently. She accepts peter’s offer and communicates through email. The email enters peter’s inbox 15 minutes before the stipulated offer time lapses. Communicating acceptance of an offer through email is valid provided such communication occurs within stipulated time. Additionally, email is deemed appropriate if used within the same geographical location. Thus email was an acceptable means of communicating acceptance of Peter’s offer.

Conclusion

Bearing in mind the facts in this case, there is no agreement reached between Sally and Burt. However, Sally’s timely communication of acceptance to Peter implies that the elements of agreement are legally enforceable.

References

Cases

Codelfa Construction Pty Ltd v. State Rail Authority of New South Wales (1982) 149 CLR 337

Olivaylle Pty Ltd v Flottweg GMBH & Co KGAA (No 4) [2009] FCA 522

Reese Bros Plastics Ltd v Hamon-Sobelco Australia Pty Ltd (1988) 5 BPR 97325; 15- 305

Routledge v McKay [1954] 1 All ER 855

Other Sources

Burnett, Richard and Victor Bath. 2009. Law of International Business in Australasia. Perth: Federation Press

CCH Australia Limited. 2011. Australian Corporations & Securities Legislation. Perth: Taylor and Francis

Duncan, William. 2005. Joint Ventures Law in Australia. Melbourne: PF Pages

Helewitz, Daniel. 2010. Basic Contract Law for Paralegals. Aspen: Aspen publishers

Monahan, Geoff. 2001. Essential Contract Law. Perth: Francis and Taylor

O’Shea, Kathryn and Kylie Skeahan. n.d. “Acceptance of Offers by E-Mail: How Far Should the Postal Acceptance Rule Extend?” Australia Journal of law. 23(5)

Spigelman, Chris. 2001. The Poet’s Rich Resource: Issues in Statutory Interpretation Sydney: Parliament House Press

Stone, Richard. 2009. The Modern Law of Contract. London: Taylor and Francis

Thorpe, Chris, Patrick Thorpe and John Bailey. 1999. Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises. Melbourne: Kogan Page

Turley, Ian. 2001. Principles of Commercial Law. Sydney: Taylor and Francis

Winckel, Anne. 1999. “The Contextual Role of a Preamble in Statutory Interpretation”. Melbourne University Law Review 184(2).

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